A ‘set and forget’ attitude can no longer persist

A ‘set and forget’ attitude can no longer persist

Like mortgages, once upon a time life insurance policies and portfolios would incur little change year-on-year and, as a consequence, it was common to see the ‘set and forget’ practice of many clients and advisors.  This attitude was aided also by the fact that many Australian’s held a vast majority of their personal insurances within the superannuation environment which often meant they were out of sight and mind.

Over the past few years, however, we have seen increasing volatility and some significant premium increases most notably around income protection as well as Life & TPD cover within industry superfunds.  It was evident that insurers had concerns about keeping the income protection product profitable but we’re not sure anyone saw the enormity of losses that were about to ensue.

In the 12 months to March 2020, the industry as a whole reported an after-tax loss of $1.8bn dollars, an incredible transition from a $760m profit in previous 12 months.  Some of this was due to poor investment results in the Dec and Mar quarters due to COVID-19 but much of it was also due to income protection products which were contributing losses in excess of $100m per month.

This can be seen below in our governing body, APRA’s, recent quarterly statistics report to March 2020.

The reasons behind these results are varied but most notably they are due to;

  • Claims experience being far greater than ever anticipated driven largely by an increase in musculoskeletal and mental health claims
  • Extremely low returns on investment. Insurers place their deposits into bonds and other fixed interest products and with interest rates at globally low levels, they are simply not making the returns that were forecasted years before when policies were being priced
  • Regulatory change in the superannuation industry for those with inactive accounts or under the age of 25

It is the trend seen in the graphs above that is worrying however and the reason that APRA has now seen fit to step in to enforce product change with the first having been the abolishment of new ‘agreed value’ income protection policies from the 1st of April, 2020.  This is one of a number of changes that will be seen over the coming 12-18 months (and perhaps beyond) aimed at achieving APRA’s clear mandate for income protection products to become profitable in their own right and not subsidised by lump sum products.

Along with product amendments, the impact most keenly felt for our clients has been the significant premium increases that almost every insurer has already implemented and the likelihood is that more are to come.  Just this week, OnePath announced a 25% increase to IP (Income Protection) premiums for both stepped and level premiums and we’ve seen similar (and some even greater) increases from many other insurers over the past few months.

The importance of reviewing your portfolio

Once, this industry would see little change to policies year on year. This narrative certainly does not ring true for the next 36 months (at least) and our focus at MBS Insurance is strictly to deliver better outcomes and proactively manage our clients’ insurance needs and portfolios.

We have believed for the past few years that the economics of the industry were heading in this direction and whilst we did not necessarily expect the severity of these results, we have been proactively driving discounted product arrangements with our Insurer partners.  This is not only for new clients, but also existing policy holders.

While reduced premiums appear contrary to what the industry requires, we are in the fortunate position of having a scaled distribution business model, with a client base in a desirable demographic.  Moreover, the philosophy of treating Insurers like partners ensures our clients attain better outcomes and we will continue to proactively mitigate the impact of these changes on our clients via negotiated terms and client engagement, to ensure portfolios remain appropriate and necessary.

Whilst we have always sought to disrupt the ‘set and forget’ culture within our industry, this product change and premium volatility has meant that the engagement of our clients at review time has never been greater, which is pleasing.  However, I would implore anyone with personal insurances in place, whether through their superfund or in a retail policy, to ensure that your existing portfolio is reviewed to ensure it remains the most appropriate and competitive portfolio available.

A ‘set and forget’ attitude can no longer persist… Please get in touch 02 9415 1511 or email reception@primeadvisory.com.au.

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Super guarantee amnesty ends on 7th September

Super guarantee amnesty ends on 7th September

Don’t wait until it is too late. This is the final call for all employers to apply for the super guarantee amnesty before tougher penalties apply. Note there are no extensions available.

As reported in March, the long-awaited superannuation guarantee amnesty bill passed both houses and received royal assent. This super guarantee amnesty provides for a one-off amnesty to encourage employers to self-correct historical super guarantee non-compliance dating from 1 July 1992 to 31 March 2018.

Note payment plans are available if you want to apply but don’t have the funds to pay right now. Additionally, any amnesty payments made before 7th September 2020 are tax-deductible.

If you need assistance, please get in touch with the team at PrimeAccounting on 02 9415 1511 or email reception@primeadvisory.com.au.

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Do not be scammed

Do not be scammed

The Australian Government and Australian Tax Office are warning Australians to keep an eye out for fake/impersonation scams. Scammers want to get their hands on more than just your money. Your personal info is just as valuable.

You might be familiar with scams that ‘phish’ for personal and financial information – like your TFN, myGov details, address, or date of birth – by pretending to be government agencies. Criminals can use these details to drain your bank accounts, buy expensive goods and even scam your family and friends.

Scamwatch reports over $1.26 million lost and more than 7100 reports made as in June however in reality the losses are likely to be far greater. Reported scams increased during tax time with text messages claiming to be from myGov or from agencies claiming to help victims gain early access to their superannuation.

“Scammers are increasingly taking advantage of the financial difficulties and uncertainty generated from the COVID-19 pandemic to trick unsuspecting Australians,” ACCC Deputy Chair Delia Rickard said.

From 1 January-5 July 2020 Scamwatch has received:

  • 67 reports of scams involving impersonation of the Department of Health, or state Department of Health and Human Services, with losses over $8700
  • 443 reports of scams involving Australian Federal Police impersonations with losses over $176,000
  • 1,070 reports of scams involving Services Australia impersonations with losses over $94,000
  • 1,638 reports of scams involving myGov impersonations with losses over $105,000
  • 2,016 reports of scams involving Department of Home Affairs impersonations with losses over $99,000
  • 2,389 reports of scams involving ATO impersonations with losses over $905,000.

 

If you have been scammed and needed to change any of your contact information, please get in touch with our office.

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Pandemic fatigue! Do you have it and what to do about it?

Pandemic fatigue! Do you have it and what to do about it?

It has been months of stress and uncertainty. If you are anything like me, you are pining for normality.  Spring is only a few weeks away, but the end of the pandemic is not. Months of coping with a rollercoaster of emotions sparked by the stressors of quarantine, self-isolation, social-distancing, lock-downs, losses, grief, uncertainty, unpredictability and anxiety are taking a toll on our mental health.  Pandemic Fatigue is not an official medical term, as yet, however, it does describe the impact that COVID-19 stressors are having on our thoughts, feelings and behaviours. So what are some of the signs you may have Pandemic Fatigue?

Signs of pandemic fatigue

  1. From being a super diligent face mask wearer and always washing your hands, you find yourself dodging those sanitiser bottles or holding your breath when passing people in the hope of not breathing in any stray viral-ladened spittle missiles.
  2. Where social distancing was part of the new normal, you find yourself leaning into conversations at the coffee shop and going in for the hug.
  3. As much as you sleep, you still feel exhausted. Napping during the workday is also not helping nor are those sleeping tablets that you borrowed from your best mate a few months ago.
  4. You are feeling less patient and more irritated, snapping at those close to you like a chihuahua.
  5. You are feeling stressed by things that you ordinarily would take in your stride.
  6. You are getting more upset and emotional about the little things that previously wouldn’t have raised your heart rate.
  7. You are feeling more hopeless about the future, and there seems to be no light at the end of the COVID-19 tunnel.
  8. You are eating more food, drinking more alcohol because what else is there to do and perhaps using more substances than usual.
  9. Your brain feels foggy and concentrating takes a significant effort, particularly if it has anything to do with your work to-do list, house chores, gym rosters and remembering to go shopping.

Our stress response is switched on 24/7

I know my attempt as humour needs work, however on a more serious note, if you said ‘that’s me’ to one or more of the above, you may just be feeling Pandemic Fatigue. Totally normal, understandable and expected. Our bodies were never designed to be ‘switched on’ in this stress mode for months on end.

Back in caveman days, our stress or survival response was triggered for only short bursts to get us out of danger and save us from the sabre-toothed tiger. It was never designed to be switched on 24/7! Our physiological stress response has been activated for a while now, and we are running out of energy. What we need are strategies to manage our Fatigue physically, mentally and emotionally. So what can you do to help minimise the impact of Pandemic Fatigue?

Some suggestions on how to get back on track

Protect yourself and others.  Wearing masks, washing our hands, and social distancing is making a massive difference when it comes to community spread. We hear this from all the experts on TV almost nightly. Put your masks on people! Remind yourself that by doing these necessary things, you are taking control of this otherwise uncertain environment.  This in turn will make you feel more hopeful as you will start feeling that you, your family and community will stay safer.

Clean up your sleep. Have a look at your sleep routine and try and maximise the quality and quantity of slow-wave and REM sleep, so that you can re-energise your brain and sort out those folders of new information that you have learnt that day. Remember the data is clear that consistency of sleep, i.e. the time you go to sleep and wake up every day, is the most effective way to get better quality sleep.

Also sleeping in a quiet and dark room, with a temperature of between 21-23 degrees Celsius makes for an ideal sleep environment. We know that 75% of insomnia is caused by stress and stress, in turn, causes insomnia! So focusing on your sleep and general wellbeing is a no brainer if you want to get through the next few months and curb this vicious cycle.

Push the pause button when emotional. When your brain switches into survival mode, your emotional part of your brain is in the driver’s seat. So feeling more sensitive and fragile is normal. If you find yourself cranky at the moment, and your emotions are getting the better of you, push the pause button and try and remove yourself from the situation or conversation.

Taking a few deep breaths also sends the message to your brain that you are calm and therefore must be safe. So the stress response switches down a gear, or two. Once you are feeling less emotional, then tackle the conversation or situation using your wonderfully developed pre-frontal cortex or thinking brain. Responding with thought versus reacting with emotion is vital.

Get active without a major sweat.
Choose activities that you enjoy but have perhaps let slide recently. Replace walking around the block and then kicking it under the bed, with a real walk in the fresh air and on the pavement! Exercise is fantastic for stress management, and the best part is you don’t need to be running on a treadmill at speed 15. Walking at a moderate pace 3-4 times a week has been shown to have a significant impact on our stress levels. If you are walking and talking and feeling a bit puffed out, researchers say you are walking too fast.

Nurture your creativity. Engaging in activities you used to enjoy is an excellent way to feel a sense of normalcy and reconnect to your sense-of-self. It can also be a good de-stressor that will improve your concentration and focus. Maybe pick up that project at home that you’ve been putting aside for a rainy day.

Perhaps a hobby that you used to spend lots of time doing and brought you enjoyment. Get those creative juices flowing. And if you have no idea what I am banging on about, watch a funny movie that gets you laughing like there is no tomorrow. We know from research that laughter increases our naturally produced happy chemicals, including endorphins, serotonin and oxytocin.

Connection is everything. Connecting with others is super important. I know I have said this so many times in the articles I have written; however, research has proven time and time again that we are DNA wired to connect and connection is crucial for good mental health. We prioritise connecting with our tribe above all else, even having a voice in the tribe. As humans, we crave belonging. So for those introverts who are reading this, remember that connecting with a friend or a family member gets that wonderful connection hormone oxytocin to levels that can truly make you feel happy and loved.

Be clear on what you need from others. Be honest with people that you are close to if you are struggling with negative feelings. Many of us are feeling pretty crappy at the moment and are frankly quite tired of this viral environment. Merely wanting to be ‘normal’ again seems a tough ask. Often sharing how are you feeling with someone that can hold the space for you can be the difference between feeling really lonely and feeling uplifted and supported.

To get the support you need, let the other person know what it is that you want and need from them. If it is merely to be a listening ear, ask them for this. If it is advice you are after, make this clear too. There is nothing more frustrating than sharing how you feel with someone who then promptly goes into solution mode and starts providing unsolicited advice. I have no doubt the intention is well-meaning, however by and large it is not helpful in the moment. So stand your ground, be clear and ask for the support you need.

No more mind-reading. If you wake up feeling a bit irritable and impatient, let your close loved ones into the secret. They are not mind-readers.  Knowing that you’re not quite yourself and you’re feeling a bit sad, frustrated or cranky helps them understand if you don’t want to talk, or if perhaps you respond in a sharper way than usual. This doesn’t mean that you treat your family like a punching bag metaphorically. You still need to manage your emotions as best as you can and of course, are responsible for your behaviour. This is not a chance to revert back to childlike behaviours and start throwing your toys out of the cot.

Protecting your relationships and those closest to you is very important. Having more intimate connections with others who better understand you will help nourish you emotionally and help protect you against those stresses and challenging circumstances that are often out of our control.

Reach out if you are feeling lonely. For those who live alone or do not have a family or friend support structure around them, please remember that there are places you can go for support and help. Australia offers some amazing online support and resources. Lifeline (13 11 14) is just one of many who are available 24/7 and are qualified to provide you with the help you need.

No one knows precisely when this pandemic will end. The news is currently rife with information on developing vaccines and that perhaps by early next year, we will have access to this vital resource. The head of the WHO, Dr Tedros Adhanom Ghebreyesus, said only last night on the news that it would take around two years for the world to get back to a healthy state. Two years, what is he thinking? However, the reality is it may very well take this long for the world to settle.

And when you are having one of those days, focus on what you can be grateful for.  I keep on pinching myself that I live in Australia. Things could be so much worse. I am grateful every day that my family are okay, and I can put my running shoes on and go for a walk under the glorious sunshine. Many others don’t have this luxury and have suffered unimaginable losses. It is this fact that keeps me moving forward and hopeful that this pandemic too will come to an end.

 

Author: Dr Leanne Wall (MBBCh. BSc. Grad Dip Counselling)
m: +61 (0) 409 216 289
e: leanne@drleannewall.com
w: www.drleannewall.com
l: linkedin.com/in/leanne-wall-730a3142

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Binding Death Benefit Nominations

Binding Death Benefit Nominations

by Stephen Lynch, Somerville Legal

Just as it is desirable to maximise your wealth during your lifetime, it is important to ensure that in the event of your death your assets pass to the people you wish to benefit. For most people, superannuation is one of the most significant assets they have, and ensuring that it is paid to the appropriate people is a critical element of estate planning.

One of the most common mistakes people make is thinking that their superannuation is automatically an estate asset, and therefore covered by their will. In fact, superannuation is a separate type of asset that is held by the superannuation fund and paid out by the trustee of the fund upon the death of the member of the fund.

In fact, in most cases, it is the trustee, and not the member, which decides who gets the member’s superannuation death benefits, and in what proportions.

For most people, the only way to ensure they, and not the trustee, control whom their superannuation death benefits pass to upon death, is to make a binding death benefit nomination (“BDBN”), which is a specific form which directs the trustee how to pay the member’s superannuation upon death.

The advantages of having a BDBN in place include the following:-

  1. Control
    Just as having a will is important to ensure that your assets are distributed according to your wishes, most people would rather decide who should get their superannuation if they should die. Most super funds’ rules state that unless there is a BDBN in place, the trustee has complete discretion as to whom to pay the person’s superannuation, as long as the recipient is a dependant of the deceased member(such as a spouse, or child including adult child, of the member) or the member’s Legal Personal Representative (ie their estate).If you want to make the decision as to payment of your super, rather than leaving it to the trustee to decide, a BDBN is critical.
  1. Certainty
    For many people, it is not just that they don’t want the trustee of the super fund to decide who gets the person’s superannuation – it is that they have specific intentions about how all of their estate is to be distributed. For example, they may want a spouse to get the super, but the children to get the non-super assets. A BDBN allows the peace of mind that your wishes will be followed in relation to your super. This allows you to make other decisions, such as gifts during your lifetime that will even up the ledger.
  1. Flexibility
    According to the Commonwealth superannuation laws, superannuation death benefits can only be paid to a person’s dependants (such as spouse or children), or estate. If you want your super to pass to someone else, such as your parents, a sibling or a charity, you will need to have a BDBN directing the trustee to pay your super to your estate. Your will can then stipulate that the proceeds are to pass to the intended beneficiary.Or, if you want your superannuation to be held for the benefit of your children, but do not want them to have control until a later age – say, 27 – having a BDBN in favour of your estate and a will that establishes testamentary trusts for your children may be the answer.Without a BDBN, your will may contain very specific provisions as to how your superannuation is to be distributed, only for the trustee to bypass your estate altogether in which case the terms of your will would not apply.
  1. Speed of payment
    When a person dies, the executor of their will would in most cases need to obtain a grant of probate of the estate from the Supreme Court. Although probate is usually a relatively simple process, there can sometimes be delays in obtaining probate, for example due to a dispute over the terms of the will, or delays in obtaining the details about each asset that need to be disclosed to the Court. If there is a BDBN in place that directs the trustee to pay the superannuation to one or more dependants (ie not to the estate), the trustee may be willing to pay out the superannuation before probate is granted.Without a BDBN, even if the trustee was inclined to pay the superannuation to the deceased member’s dependants, the trustee may await probate so as to obtain the executor’s consent to the trustee bypassing the estate.Similarly, if there were no BDBN there may be competing claims from dependants (eg the deceased’s spouse vs his or her children from an earlier marriage). Before making a determination, the trustee would in all likelihood need each claimant to provide a substantial amount of information and would take some time to go over that information before making its decision. Such delays may be avoided if a BDBN is in place.
  1. Self managed super funds and BDBNs
    If a person has a self managed super fund (“SMSF”), there are several factors which will influence who would control that SMSF upon the person’s death. Without a BDBN, whomever controls the SMSF may have the same discretion to decide how the super will be paid. If that person is a dependant, they could exercise that discretion in favour of themselves to the exclusion of their other family members, regardless of the wishes of the deceased. There have been several instances where this has occurred, with devastating results for family relationships.Of course, a BDBN may not be the best way forward in your particular circumstances. There are some circumstances where flexibility is more important than control. In all cases, the decision as to whether or not a BDBN is appropriate for you should be made only after seeking the advice of your financial adviser and estate planning solicitor.

Beware the non-binding death benefit nomination
Many people believe they have a binding death benefit nomination in place, when in fact their nomination is a non-binding nomination. A non-binding nomination indicates your preference to the trustee, but the trustee is not bound to follow it.

If your nomination as to whom is to receive your superannuation death benefits was made by simply ‘ticking a box’ when you fill out your application for membership of the super fund, and was not done by way of a separate form with adult witnesses, then in all likelihood your death benefit nomination is non-binding rather than a BDBN.

There have been many cases where the trustee has acted contrary to the wishes set out in the deceased member’s non-binding nomination. Accordingly, non-binding nominations should be treated with extreme caution, and advice sought from your financial adviser and estate planning solicitor.

Beware the lapsing period of BDBNS
Many BDBNs will lapse after three years, after which they cease to be binding on the trustee. Others are called non-lapsing nominations and will remain in place until revoked. Be careful to ensure you know whether or not your BDBN needs to be renewed every three years.

At the end of the day, superannuation represents a significant part of most people’s wealth, and careful consideration needs to be given as to whom their superannuation may be paid to in the event of their death and whether they have any specific wishes as to how it is to be paid. A BDBN is a critical tool for many people in ensuring their superannuation is properly dealt with upon their death, and should be carefully considered after obtaining specialist advice.

If you need assistance please get in touch with one of our advisors on 02 9415 1511 or email reception@primeadvisory.com.au.

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